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Idaho tests the bounds of skirting Affordable Care Act insurance rules

At the Idaho State Capitol, Gov. C.L. “Butch” Otter talks last month about his executive order allowing insurers to offer individual health plans that skirt some rules of the Affordable Care Act. (Otto Kitsinger/AP)

Idaho’s rebellion began in early January with executive order No. 2018-02. The directive from Gov. C.L. “Butch” Otter told his state insurance department to allow “creative options” in health coverage, unfettered from “the overreaching, intrusive nature of Obamacare and its infringement on Idahoans’ freedoms.”

Within a matter of weeks, the department decreed that insurance companies have substantial wiggle room as long as they offer at least one health plan that meets the Affordable Care Act’s rules. They can sell policies that lack maternity care and charge older residents more than permitted under the 2010 law. They can impose yearly coverage limits and block coverage of customers’ prior medical conditions.

In the nearly eight years of the ACA, this order by a lame-duck Republican governor is a singular act of audacity — the first time any state has stepped out on its own to foster a parallel insurance universe.

As events move swiftly on the ground — with Blue Cross of Idaho announcing that it hopes to start selling alternative “Freedom Blue” plans in March — the state’s maneuver has sparked a tempest that has spread to Washington. Dispute is raging over whether Idaho’s maneuver is legal and whether it is a clever balm for broken insurance markets or a slide back to shoddy, unfair insurance practices that the ACA had fixed.

The tempest is not likely to go away anytime soon. Depending on how events play out, the governor’s maneuver could fundamentally reorder the power dynamic the ACA created between federal insurance standards and the states.

By arguing that Idahoans deserve affordable alternatives, Otter is shining light on the shortcomings in many insurance exchanges created under the law. But a raft of patient-advocacy organizations and congressional Democrats are protesting that consumers will be hurt. Lawsuits could come soon, according to two people who spoke on the condition of anonymity about their work with national and state groups considering court challenges.

President Trump's health-care actions could have ripple effects throughout the Affordable Care Act's marketplaces. (Video: Jenny Starrs/The Washington Post, Photo: Jabin Botsford/The Washington Post)

The furor kicked up by this Western state is placing the Trump administration’s new health and human services secretary under intense cross-pressures. Alex Azar works for a president who despises the ACA, and he supervises senior officials who have been trying for nearly a year to hand states more flexibility over health-care policies. Yet he repeatedly has said he will uphold the law.

At three appearances on Capitol Hill this month, Azar was grilled by Democrats about how he plans to handle Idaho. He largely sidestepped the questions. “All we’ve seen is a press report,” the secretary said, pointing out that insurance regulators there have not yet approved Blue Cross’s plans. Pushed further, he said he expects the Department of Health and Human Services to evaluate Idaho’s strategy before the plans go into effect.

Azar did not budge last week in his first meeting with reporters. “I just don’t believe in premature opinions on complex, important topics — serious, weighty matters,” he said. “Let’s see where the state of Idaho ends up.”

Nor would HHS elaborate on a conversation Azar had with Otter over the weekend while speaking at a gathering of governors in Washington. A department statement said the secretary “expressed sympathy” for challenges that the ACA poses.

Azar has adopted his public wait-and-see stance even though Idaho Insurance Director Dean Cameron began conferring with federal officials before the governor’s executive order.

“We had interactions” with former HHS secretary Tom Price that led the state to “believe we were headed in an acceptable direction,” Cameron said in a recent interview. Officials also had “a number of conversations” with the Center for Consumer Information and Insurance Oversight, which implements much of the law for HHS, Cameron said. “They have been very good to work with,” he said. “They have been asking lots of good questions . . . I think they are trying to figure out what to do with us.”

In its eagerness to undercut the law, the Trump administration has urged states for months to think of ways to alter their ACA marketplaces and Medicaid programs. A growing number of states are applying for federal waivers from the usual rules for both. What makes Idaho so bold is that it didn’t even bother to ask.

If the federal government lets Idaho continue along its path, ACA fans and foes alike predict that other states also will defect from the law’s insurance rules. Those rules include 10 required categories of health benefits and protections for people with preexisting medical conditions.

“It could be the tip of the spear,” said Trish Riley, executive director of the National Academy for State Health Policy.

Idaho has been somewhat distinctive from the ACA’s start: It’s one of the few GOP-led states that formed its own marketplace rather than relying on the federal exchange. It still boasts five participating insurers, giving customers more choice than in most of the country. Blue Cross has the largest enrollment.

Yet the state also is part of a national pattern in which ACA enrollment has been sliding, particularly among residents ineligible for premium subsidies because their incomes are above 400 percent of the federal poverty level. Without that financial cushion, they are exposed to escalating rates.

In Idaho, unsubsidized customers have dwindled each year since its marketplace first opened in 2014, from 80,000 to about 55,000 a year ago, according to statewide figures supplied by Blue Cross of Idaho. Peter Sorensen, the company’s vice president of individual and government markets, said a growing number of Idaho’s ACA customers are buying the least-expensive bronze tier of coverage — suggesting that, even with subsidies, what had been the popular silver rung is increasingly unaffordable.

This is the problem the governor and his insurance director are trying to address. Shortly after signing his order, Otter set off on a tour to talk it up. In Idaho Falls, he stopped in at Mountain View Hospital. The state, he told hospital staffers, will lead the nation by encouraging insurance policies “that meet the needs of the individual, not the wants of government.”

Cameron, the official in charge of making that happen, is a third-generation insurance agent who served for a quarter-century in the state Senate and now leads the National Association of Insurance Commissioners’ health insurance committee. In a bulletin he issued after the governor’s order, he spelled out the rules for new “state-based” health coverage to be sold alongside ACA marketplace plans.

“We think it not only coexists,” Cameron said in the interview, “it complements, it stabilizes the market.” Because both types of individual plans will be in the same risk pool, he expects that marketplace rates will be helped as the alternative coverage draws more healthy Idahoans to sign up.

The state-based plans can be sold throughout the year, not just during ACA enrollment periods. They must include most required ACA benefits — but not all. Plans can exclude children’s vision and dental care as well as maternity benefits. They can charge older members five times as much as younger ones, a wider spread than the ACA allows. And unlike the law’s marketplace plans, they can impose separate caps for prescription drug coverage and block coverage of a customer’s preexisting medical condition for a year if the individual was uninsured for 63 days beforehand. Federal subsides could not be used.

“What they are proposing seems quite clearly to be illegal,” said Andy Slavitt, who within HHS was acting administrator of the Centers for Medicare and Medicaid Services during the Obama administration’s final years. “The reality is, Congress passed a law that entitles Americans to those protections.”

Cameron disagrees. “Part of our argument with the federal government,” he said, is that Idaho’s alternative plans “would be far more comprehensive” than the administration’s ownstrategies to widen insurance availability outside ACA rules.

Blue Cross of Idaho officials said that all but one of their five proposed plans would include maternity coverage and that all would cover preventive care and contraceptives. For a family of four, the average premium for a new “Freedom Blue Standard” plan would be $572 per month — nearly $400 less than a Blue Cross bronze plan in the ACA marketplace.

While similar in many ways, the Freedom plan would have a $1 million annual limit on coverage and a separate $6,500 limit on medicines.

Some health policy experts say Blue Cross and any other insurers that create alternative plans could be legally vulnerable because the ACA includes a penalty of $100 per person for every day an insurer sells coverage that breaks the law’s rules.

“This is a decision we’ve looked at through all lenses,” said Dave Jeppesen, an executive vice president at Blue Cross of Idaho. He said that the ACA gives state regulators authority to carry out the rules “and we’re following their guidance at this point.”

Consumer advocacy groups are crying foul. “If this ends up peeling healthy people out of the exchange because they can get a better price elsewhere and can afford to gamble on a skimpier plan, who is left in the exchange?” said Lauren Necochea, director of Idaho Voices for Children. She fears that it will leave a concentration of sick people that will drive up the prices of ACA plans.

On Valentine’s Day, 15 national groups representing patients with serious diseases wrote to Azar, urging him to “address this issue in a timely manner.” A quartet of congressional Democrats were more pointed in a letter to him and CMS Administrator Seema Verma. Idaho’s rules “eviscerate critical protections that are enshrined in federal law,” they wrote, asking the department to explain their legality.

In a three-paragraph reply, Verma told the lawmakers that the CMS “does not have any information to share.”

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